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DOES THE SAMARITAN'S DILEMMA MATTER? EVIDENCE FROM U.S. AGRICULTURE
Author(s) -
Deryugina Tatyana,
Kirwan Barrett
Publication year - 2018
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12527
Subject(s) - dilemma , economics , crop insurance , bailout , empirical evidence , revenue , downside risk , agriculture , public economics , actuarial science , financial economics , finance , macroeconomics , financial crisis , epistemology , biology , portfolio , ecology , philosophy
The Samaritan's dilemma posits a downside to charity: recipients may rely on free aid instead of their own efforts. Anecdotally, the expectation of free assistance is thought to be important for decisions about insurance and risky behavior in numerous settings, but reliable empirical evidence is scarce. We estimate whether the Samaritan's dilemma exists in U.S. agriculture, where both private crop insurance and frequent federal disaster assistance are present. We find that bailout expectations are qualitatively and quantitatively important for the insurance decision. Furthermore, aid expectations reduce both expenditure on farm inputs and subsequent crop revenue. ( JEL D72, H84, Q18)